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François Perrot Walter Rha Adrian Wozniakiewicz. Walter Rha , François Perrot, Adrian Wozniakiewicz. Capital City Canberra named capital city in 1908 Population 22 million 60% concentrate in Sydney, Melbourne, Brisbane, Perth and Adelaide. Free-Market Economy High GDP per capita

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slide1

François Perrot

Walter Rha

Adrian Wozniakiewicz

Walter Rha, François Perrot, Adrian Wozniakiewicz

australia

Capital City

    • Canberra named capital city in 1908
  • Population
    • 22 million
    • 60% concentrate in Sydney, Melbourne, Brisbane, Perth and Adelaide.
  • Free-Market Economy
    • High GDP per capita
    • Low rate of poverty
  • 13th largest economy in the world
  • Recognized for its human development, quality of life, health care, public education & economic freedom
  • International Presence
    • Member of the UN, G-20, Commonwealth of Nations, OECD, APEC, WTO
  • Industries
    • Agriculture, Dairy, Banking, Mining, Wool & Cotton, Wine, Fisheries
Australia
history

The Commonwealth of Australia

    • First discovered by Dutch explorers in 1606
      • North Western Australia
    • Captain James Cook discovers eastern Australia in 1770
      • Establishes a new penal colony for Britain
    • Since the European settlements in the late 18th century
      • Australia experiences significant population growth
      • Victorian Gold Rush 1851-1860’s (population tripled)
      • Convict labor System 1787-1852
    • Continent was set up into parliamentary governing crown colonies
      • Six colonies
        • Western Australia, Northern Territory, South- Australia, Queensland, New South Wales
    • In 1901 the six colonies unite and become the federation Commonwealth of Australia
    • In 1908 Canberra is named the capital city of Australia
      • As a compromise between rivals Melbourne and Sydney
History
mining

Worlds Largest Producer of Leads, Diamonds

  • Uranium
    • Worlds largest Uranium reserves 23%
    • 3rd larges producer
    • Exports valued at $1.1 billion annually
  • Coal
    • Worlds largest net exporter of coal accounting for 29%
    • Dubbed the “Saudi Arabia of Coal!”
  • Bauxite
    • Worlds largest producer of Bauxite 33% of global production
    • Highest grade deposits of Alumina
  • Aluminum
    • 5th largest aluminum producer
  • Zinc
    • Large reserves
  • Nickel
    • Large reserves
Mining
agriculture fishing

Agriculture:

    • 12% share of GDP
    • $155 billion a year industry
    • 134,996 farms covering - 61% of countries landmass
  • Dry-land farming & Irrigation Mix
    • Due to the dry and infertile soil
    • Horticulture & Viticulture
  • Fishing:
    • $2.3 billion a year industry
    • Aqua farming sector
      • Accounts for 32% of the total industry
    • Fish exports roughly $1.84 bullion a year
Agriculture & Fishing
wool and dairy

Wool

    • Export oriented
      • 90% of production is exported
    • Accounts for 9% of world production
    • Market Leader in fine quality wool sector
      • Producing 50% of worlds Merino wool
  • Dairy
    • Fourth most valuable agricultural export
    • $3.4 billion a year industry
    • Employs over 40 000 people
    • 1.6 million cows producing on average 9023 million liters of milk per year
Wool and Dairy
wine tourism

Wine

    • Over 2000 wine companies
    • Employs roughly 31 000 people
    • $2.8 billion industry
    • Exports over 722 million liters a year
    • Tradition
      • Rich tradition of winemaking dating back to 1788
  • Tourism
    • 3.9% of Australia’s GDP
    • $32 billion a year industry
    • 5.7 million visitors in 2010
    • Decline in Tourism between 2001- 2003
      • Due to external events (Ex 9/11, SARS)
Wine & Tourism
banking stock exchange

Banking

    • 2009: Total banking sector assets $2.59 trillion
    • Government regulated
      • Prohibits merger between two major (AUS) banks in order to preserve competitiveness
  • Stock Exchange:
    • 1861 First Exchange – Melbourne
    • ASX (Australian Securities Exchange)
      • Formed in 2006
      • Merger of ASK and Sydney Futures Exchange
    • Diverse international and Domestic Customer base
Banking & Stock Exchange
economic performance

Services: main component of GDP

  • Constant Real GDP growth
    • Doubled in last 20 years
Economic performance
international trade region
International Trade & Region
  • China: Australia’s major business partner
    • Top exporting destination (20%)
    • Top import origin (15%)
  • US: use to be the major one in 2007 with $47bn
  • Regionaltrade
    • Exports: Japan 2nd, India 3rd. East Asia (incl. ASEAN) = 67%
    • Imports: US 2nd, Japan 3rd. East Asia = 52%
no twin deficit

The CAD isgrowingfastbut is of no concern

Fiscal deficitonlyduring the 2008 global crisis

No “twin-deficit”
foreign direct investment

Stronglygrowing net FDI inflowssince 2000

2010 Dun&Bradstreet top rank fors safe FDI

A.T. Kearney FDI Confidence index: 6th

Miningaccounts for 25% of the FDI inflows

Foreign Direct Investment
stimulate fdi

Government Eliminate distortions:

    • Strong financial and regulatory enforcement
    • Corruption perception index: 8th least corrupted country (=Switzerland)
    • Social context: social security, unemployment benefits, educational
    • Skilled migration program: point based system, adjustable to the needs
  • Macroeconomics stability:
    • RBA stabilizes inflation around 2-3% by keeping interest rates high in “normal” times
  • 2008 Global finance economic crisis:
    • Monetary policy: RBA sharp cut on rates (from 7.5% to 3% in 6 months)
      • Ease financial pressure on indebted households and businesses
      • Stimulate consumption
      • RBA guaranteed bank deposits and wholesale’s funding of Australian banks
    • Fiscal policy:
      • US$8bn stimulus package (1% GDP): pensioners and low-income families (bonuses), housing construction, trainings
      • Feb 2009: US$26bn package for nation-building (education, infrastructure, tax break for SME, $ for workers, farmers, students)
Stimulate FDI
macroeconomic competitiveness social infrastructure

Basic Education: Overview

    • Education is compulsory from 6 to 16 years of age
    • Literacy rate is 99% for men and women
    • Government expenditure on education as a percentage of GDP was 4.8% in 2009
    • Government initiated the Building the Education Revolution (BER) program in 2009
    • BER Proposes to provide infrastructure funding worth $14.7 billion to Australia’s 9,540 schools
Macroeconomic Competitiveness:Social Infrastructure
macroeconomic competitiveness social infrastructure1

Healthcare: Overview

    • In 2009, Healthcare expenditure of Australia stood at around $51.6 billion, representing 5.5% of GDP
      • OECD average of 8.4%
    • 70% of Australia’s healthcare expenditure is funded by the government
MacroEconomic Competitiveness:Social Infrastructure
macroeconomic competitiveness political infrastructure

Legal Landscape: Performance

    • Australia ranks in the 96.7 percentile on the government effectiveness parameter.
      • measures quality of public services, civil service and degree of independence
    • Australia ranks in the 95.2 percentile on the rule of law parameter.
      • measures extent to which agents have confidence in the rules of the society and particularly at the quality of contract enforcement, the police and the courts.
    • Australia ranks in the 96.1 percentile in the control of corruption parameter.
      • measures the extent to which public power is exercised for private gain, especially corruption, as well as the private and elite influence over the state
MacroEconomic Competitiveness:Political Infrastructure
building the diamond factor conditions

Assimilating Foreign Technology:

    • India-Australia Strategic Research Fund in science and technology
    • China-Australia Special Fund for advanced science and technology development.
    • Australia also entered into scientific bilateral collaborations with the US, Canada, South Korea and Japan.
  • Administrative Infrastructure
    • 1st: OECD listed Australia as most open economy
    • 2nd lowest levels of red tape in terms of business procedures
Building the Diamond:Factor Conditions
building the diamond factor conditions1

Improving Efficiencies:

    • The Australian government has funded projects supporting:
      • telecommunication and IT infrastructure
      • broadband services for local and rural areas
      • the development of green telecommunications
      • carbon trading.
    • The government has also been successful in setting up Tele-education in remote areas
Building the Diamond:Factor Conditions
building the diamond context for firm strategy and rivalry

Reducing Impediments to Competition:

    • Australia has transformed itself from an inward-looking, highly protected and regulated economy to anopen and export-oriented economy
    • Australia is a member of various internationalorganizations including:
      • Asia Pacific Economic Cooperation (APEC)
      • ANZ Certa (1983 FTA with New Zealand)
      • Common Wealth Cairns Group
      • International Monetary Fund (IMF)
      • Organization for Economic Co-Operation and Development
Building the Diamond:Context for Firm Strategy and Rivalry
slide20

Building the Diamond:Context for Firm Strategy and Rivalry

  • Effective Competition Policy:
    • The Australian government will take measures targeted at promoting competition and cracking down on anticompetitive practices
      • Trade Practices Act (TP Act) 1974 include moves to further defend small business from predatory pricing
  • Effective Intellectual Property Protection Mechanisms:
    • Australian patent law prohibits double patenting.
      • It does not prohibit two patents for the same invention but of differing claim scope.
market overview

Market value

    • The Australian metals & mining industry shrank by 5.6% in 2009 to reach a value of $63,613.2 million.
  • Market value forecast
    • In 2014, the Australian metals & mining industry is forecast to have a value of $96,280.9 million
    • an increase of 51.4% since 2009.
  • Market segmentation
    • Coal is the largest segment of the metals & mining
    • Accounts for 52.9% of the industry\'s total value.
Market Overview
mapping the cluster

Buyer Power

    • Average buyer is large company > Boosts Power
    • Low level of product differentiation > Boosts Power
    • Large number of customers > Reduces Power
    • Mining necessity for many buyer’s business > Reduces Power

OVERALL ASSESMENT = MODERATE LEVEL OF POWER

  • Supplier Power
    • Mining companies are vertically integrated > Boosts Power
    • Mining equipment specialized and specific > Reduces Power
    • Availability concerns of future commodities > Boosts Power

OVERALL ASSESSMENT = MEDIUM - HIGH LEVEL OF POWER

Mapping the Cluster
mapping the cluster1

Threat of New Entrants

    • Very high initial investment costs > Reduces Threat
    • Increasingly stringent environmental regulations

> Reduces Threat

    • Resource Super Profit Tax > Reduces Threat
    • Criminal Penalties for violating environmental laws > Reduces Threat

OVERALL ASSESSMENT = WEAK THREAT

Mapping the Cluster
  • Threat of Substitutes
    • No direct substitutes for metals and minerals

> Reduces Threat

    • Indirect Substitutes require changing technologies

> Reduces Threat

    • Very High Switching Costs > Reduces Threat

OVERALL ASSESSMENT = LOW THREAT

mapping the cluster2

Rivalry

    • Scale economies favor large companies
    • Mergers and acquisitions are expected to increase competitiveness > Boosts Rivalry
    • Exit barriers are high thus major players are strongly motivated to remain in industry > Boosts Rivalry
    • Industry margins are susceptible to changes in prices and growth is hard to sustain > Boosts Rivalry

OVERALL ASSESSMENT = STRONG LEVEL OF RIVALRY

Mapping the Cluster
key companies

BHP Billiton Group

    • BHP Billiton is a diversified natural resources group.
    • The group exports coal, iron ore, copper, nickel, manganese ore, primary aluminums, and manganese and chrome ferroalloys.
    • The group has a global presence with more than 100 operations in 25 countries.
    • Market Capitalization of $249 Billion USD
Key Companies
mining cluster history of demand

History of major mining booms

    • 1850 gold rush
    • Late 19th mineral
    • 1960s mineral & energy boom
    • Late 1970s, early 1980s energy boom
  • Today: commodity boom
    • Strong growth of developing countries: growing demand for commodities
    • Australia: coal, iron & steel, aluminum, copper, etc.
    • Strong world demand: minerals and ores
    • China: top destination for Australia’s exports
    • Growing demand for uranium until January 2011
    • World trend
Mining Cluster: Historyof demand
mining cluster performance
MiningCluster: performance
  • Employment and Investment
    • World growing demand for metals, previous metals and ore (China, India) – growing investments
    • Growing technology requiring less man-labor
  • Mining booms: investment, value added
government subsidies
Government subsidies?
  • Subsidies in 2006 (research by Institute for Sustainable Futures for Greenpeace Australia):
    • Electricity: US$ 2bn
    • Transport: US$ 7.5bn
    • Strong Aluminum subsidies too
comparison with indonesia
Comparison with Indonesia
  • Indonesia has a similar profile in mineral resources: coal, precious metals, uranium, iron, etc.
  • What is different?
    • Barriers to trade, political instability, corruption, lack of financial and regulatory laws enforcement, >750 dialects, thousands of islands
  • Indonesian boat people seeking asylum in Australia
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